MamaMia’s Pizza purchases its pizza delivery boxes from a printing supplier. MamaMia’s delivers on-average 900 pizzas each month (assume deterministic demand). Boxes cost 30 cents each, and each order costs $10 to process. Because of limited storage space, the manager wants to charge inventory holding at 20 percent of the cost. The lead time is 7 days, and the restaurant is open 360 days per year, assuming 30 days per month.
a. Determine the economic order quantity
b. What is the reorder point? (assume no safety stock is required)
c. How many orders should be placed per year?
d. What is the total annual cost?
e. If MamaMia’s current order quantity is 600 boxes. How much can be saved by adopting an EOQ versus their current Q = 600?